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Complaints from small business that they were drowning in federal forms and going broke because of federal regulations led to the passage of the Regulatory Flexibility Act in 1980 (5 USC 601). Agencies proposing rules that would have a "significant" economic impact on small business, small not-for-profit organizations, or small governmental entities must prepare a Regulatory Flexibility Analysis (RFA) and try to find simpler, less burdensome ways for such small organizations to comply with federal requirements.

The Act applies to independent regulatory agencies and executive agencies. The Small Business Administration (SBA) oversees the Act's enforcement.

The Act does not require an agency to abandon a proposed regulation because it might have a "significant" impact on small entities, only to consider less burdensome alternatives and to explain why it has rejected those alternatives.

If a proposed regulation comes under the Act, an agency must prepare an Initial Regulatory Flexibility Analysis, which it publishes along with the proposed rule and sends to SBA. SBA has no OMB-like review power. It simply monitors agency compliance with the Act.

After the comment period, the agency must prepare a Final Regulatory Flexibility Analysis, which should respond to any issues raised in the public comments and which is published with the final rule or made available to the public. (The Regulatory Flexibility Analyses are often combined with the Regulatory Impact Analyses required by E.O. 12291.)

The Regulatory Flexibility Act also requires agencies to publish and implement a plan for reviewing existing rules on a 10-year cycle to minimize any significant economic impact these rules might have on small entities.

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